Decision Analysis

Question 1 a. Given the following expected returns and standard deviations of assets B, M, Q, and D, which asset should the prudent financial manager select? Justify your answer and show the calculations. b. Which asset would the risk-averse financial manager prefer? Justify your answer (See below.) c. Mohammed is hoping to buy 100 shares of Emaar shares for AED 24.00 per share on January 1, 2018. He hopes to receive a dividend of AED 2.00 per share at the end of 2018 and AED 3.00 per share at the end of 2019. At the end of 2020, Mohammed hopes to collect a dividend of AED 4.00 per share and will sell his stock for AED 18.00 per share. If the probability of his expectations being realized are .9, what will be Mohammed’s expected holding period return be? Question 2 Champion Breweries must choose between two asset purchases. The annual rate of return and related probabilities given below summarize the firm's analysis. For each asset, compute (a) the expected rate of return on Asset B (the expected return for Asset A is calculated below. (b) the standard deviation of the expected return. (c) the coefficient of variation of the return. (d) Which asset should Champion select? Calculation of Expected Return for Asset A: Expected Return = 15% (10% - 15%)^2 × 0.30 = 7.5% (15% - 15%)^2 × 0.40 = 0% (20% - 15%)^2 × 0.30 = 7.5% 15% Question 3 Identify and describe 3 or 4 Data Analysis models that can be applied in your own organization. Please provide a justification for their application, including costs and benefits associated with their implementation.